Hannover Re refuses to compete with its clients
Hannover Re is not interested in pushing into the corporate market, in contrast to its main competitors, which see it as a way of diversifying and boosting profitability, the company said at a Monte Carlo Rendez-Vous press conference yesterday.
The German reinsurer said it does not want to compete with primary insurers, its clients, and thinks that corporate business faces the same challenging pressures as the reinsurance business.
“The corporate market has exactly the same challenges as the reinsurance market,” said Ulrich Wallin, chief executive officer. “If you look at the large corporate risks, it’s a competitive market subject to the same rate pressures as the reinsurance market.” Developments in the corporate market are correlated to the reinsurance market, he noted.
SCOR Business Solutions is dedicated to large corporate and industrial risks, while Swiss Re Corporate Solutions generates around 15 percent of the reinsurer’s total premiums offering risk diversification.
Munich Re has Corporate Insurance Partner (CIP), which targets the large corporate risk sector focusing on special enterprise solutions to close gaps in clients’ coverage. Munich Re has stated, however, that it will not engage in the price war taking place in the corporate insurance segment.
Structured deals with corporate clients can generate higher returns than in reinsurance but Hannover Re said it will not participate in this market.
The company notes that engaging directly with corporates could mean competing with primary insurers, its clients. This is why Hannover Re is keeping away from this business, said Karl Steinle, general manager corporate communications at Hannover Re.
“Only when the risks are so large that primary insurers cannot cover the risks, do we come into play,” he noted.
Wallin confirmed that where the company does write insurance it is only on this basis.
“We do write some insurance as well but we see that as complementing our reinsurance activities because we write it only on some large corporate risks such as aviation, energy, marine, large property and some casualty business,” he said.
Overall, Hannover Re expects greater price stability in the upcoming renewal as reinsurers strive to prevent any further drop in price levels.
Wallin believes that positive technical margins will then ensue for a period because almost all players, including funds and collateralised reinsurers, cannot tolerate making losses for extended periods, as they are either publicly listed or, for the insurance-linked securities (ILS) market, they are basically investment funds.
Furthermore, if there was volatility on the business through a major cat loss or volatility on the asset side the market would react with higher prices, he added.
